Real Estate Investing Blog

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Definition of Passive Real Estate Investing

Passive real estate investing is a way to invest in real estate to augment income considerably well without having to necessarily stress out one’s self. You are not actively involved in generating profits or income from real estate; you are a passive investor.

What Is Passive Real Estate Investing

Passive real estate investing is when you hire or contract a real estate company to help you in finding and managing investment properties for you.

Also, passive real estate investing is defined as a process where investors contribute to real estate-related mutual funds and Real Estate Investment Trusts (REITs). This reduces the burden of running about to find properties and who to sell them for. You hire the firms to get the work done for you and then you pay them after the whole process.

What is a Passive Income

A passive income is defined as the income that you receive regularly which involves little effort from your own part. That is, while some other persons do the herculean part of the job, your own involvement does not really count but you get a huge part of the gain at the end of the whole process. You are certain of inflow of money on a regular basis, but you don’t participate in the running of the business. So, passive real estate income is the income you get regularly from real estate investment without playing an active role in the whole process. You get paid every month, quarter or year but do not participate in management or contribute work in the investment.

Even though passive real estate investing is one of the lucrative investments people can consider doing, the truth is that the investment requires a little bit of your attention in order to succeed as intended. You have to be kept abreast of the activities of the firm you’ve invested your money in so as not to be jilted investor. However, if you are certain of the firm you are dealing with; you can always relax and attend the periodic meetings, if there is any.

How To Make Passive Income In Real Estate

There are many ways to make passive income in real estate and passive real estate investing is considered a “smarter strategy” in real estate investing. There are two basic ways to make profit in passive real estate investing; one of them is direct income from rentals. Once the income surpasses the expenditures, then you are on the winning side. The other way you can benefit is by increasing the value of your investment property and mining the equity that you generate. You either can take low interest loans against the equity or sell your investment property for a profit and reinvest by buying more investment properties.

3 Ways of Passive Real Estate Investing

Investing in REITs

You can invest in REITs in a variety of different ways, including purchasing shares of publicly traded REIT stocks, mutual funds and exchange-traded funds. REITs generally own and/or manage income-producing commercial real estate, whether it’s the properties themselves or the mortgages on those properties. You can invest in Retail REITs, Residential REITs, Healthcare REITs, Office REITs and Mortgage REITs. REITs will provide you high dividend yields along with moderate long-term capital appreciation. They can become an excellent addition to your diversified investment portfolio. You must find companies that have done a good job historically in giving dividends to the investors.

Real Estate Crowdfunding

The New Opportunity for Passive Real Estate Investing is in Crowdfunding. Since 2012, over 100+ real estates crowdfunding sites have come into existence. Websites like RealtySharesallow investors to access different real estate projects. Investors can get access to different property types and locations across the country. You can invest in real estate alongside thousands of savvy investors. Through RealtyShares, you can invest as little as $5000 and choose over 1500 funded deals.

Investing In a Turnkey Rental Property

Investing in a turnkey rental property is one of the wisest investment decisions you can take today, if you are in search for how to make passive income in real estate. A turnkey rental property can be competently managed through a property management company. Therefore, your investment in turnkey rental properties is relatively safe, secure and hassle free. In turnkey property investing, everything is done for you. You would simply purchase an investment property, let the professionals oversee it and collect your monthly cash flow income, while your tenants would increase your equity or pay off your mortgage.

After purchasing the property, you leave every other thing to a turnkey property management company and expect your monthly passive income flowing into your bank account. In addition, the firm ensures that your property never remains vacant. Finding good tenants on your own can be a big hassle. A good tenant will take care of your property and pay you rent on time. A bad or disgruntled tenant can cause havoc on your property in many ways and leave it in ruins.

Another way of going about in passive real estate investing, is to hire people who are trustworthy to help you in locating properties in good neighborhoods. Then, call on a good and experienced contractor to help you renovate the property and do every other necessary repairs so that the property can become very attractive before you put it on market for rent. Now you can contract a trusted property management company for collecting rent, handling repairs and maintenance, addressing complaints of your tenants and sending money to your back account every month. Isn’t it an easy way to generate a passive income?